BehaVR Inc. just closed on a major deal that could result in up to $140 million upon its commercial success.
The digital therapeutics company, founded by former Humana exec Aaron Gani in 2016, signed a definitive agreement with Sumitomo Dainippon Pharma Co. this week to develop and commercialize both prescription digital therapeutics and general wellness products for treatment of social anxiety disorder (SAD), generalized anxiety disorder (GAD) and major depressive disorder (MDD).
As a result of the deal, Sumitomo Dainippon Pharma, or DSP for short, will pay BehaVR $5 million in upfront payments and up to $18 million in development milestone and R&D support payments, in addition to commercial and operational support fees. An additional up to $140 million in milestone payments are contingent upon commercial success, according to a news release.
In a phone interview Tuesday, Gani told me BehaVR's relationship with the Japanese pharmaceutical company first began in the summer of 2018 after he took a trip to Tokyo to meet with the leadership of its digital organization.
"They had said, 'Look, our intention is to build multiple digital therapeutics on your platform,'" he said. "They said, 'We'll start out with a very small deal to see how it goes and then we'll do bigger deals.' And that's exactly how it played out."
Over time, the two companies developed a great partnership, Gani continued, which ultimately led to this landmark development deal.
"We are excited and proud to be pioneering the use of this fast-moving new medium of virtual reality to develop treatments for anxiety and depression related mental illnesses," said Hiroyuki Baba, senior executive officer of Sumitomo Dainippon Pharma, in the release. "I could not be more pleased with this extension to our important partnership with BehaVR, who share our vision of the impact that these new products will make."
BehaVR got its start in developing virtual reality (VR) products, specifically in treatment of addiction, chronic pain and chronic stress. Gani said as the company continues to grow, it's evolving from wellness products to prescription digital therapeutics, which require FDA approval. The deal with DSP is BehaVR's first major expansion in that regard.
Gani noted BehaVR is projecting 100% year-over-year revenue growth in 2021. It's also doubled its staff to 30 since the start of the Covid-19 pandemic, and intends to double it again in 2022 as it looks to fill key product management, design, creative, XR engineering, operations, customer success and clinical roles.
While BehaVR still maintains Elizabethtown, Kentucky, as its headquarters, it has a strong presence in Nashville, Tennessee, and a growing presence in Boston, Gani said. DSP's U.S. office is in Boston, as well as its subsidiary Sunovion Pharmaceuticals Inc., which will commercialize BehaVR's products.
"Nashville is such a large health care market — it's kind of the ecosystem for health care services in the country — so over time, it's continuing to take on more significance for us and become like our center of gravity," he said. "We have more people in Nashville than any other single place, although with the pandemic, we also started hiring a little more virtually."
BehaVR has investors from both Louisville and Nashville, such as Louisville-based Chrysalis Ventures and Popular Ventures and Dr. Bill Frist, former U.S. senator from Tennessee, who is an investor and founding partner in the company. Gani was also selected as a local Endeavor Entrepreneur in late 2019.
Gani said BehaVR will look to do a Series B fundraise in the fourth quarter of this year or the first quarter of 2022.
"We're in a good position, but there's also just so much opportunity," he said. "It's definitely time to have the right capital and the right team to get after the opportunity."
